Group Buying Gone Bad

Just because you’re related doesn’t mean you can forgo the fine print.

This was the plan: Melinda and her husband, his sister, and her husband would buy the $350,000 brownstone, completely renovate it, maybe keep some renters on the lower floors, and live on the upper three floors. Melinda and her husband would stay there full-time, while her in-laws, who had a primary residence in the suburbs, would use it as a pied-à-terre. They picked certain rooms for the nights they would stay over, and weren’t worried that the apartment’s layout didn’t offer much privacy. After all, they were family.

Another thing about being family: All this was done without paperwork, or even a discussion about problems that might arise. “There was no legal agreement beforehand,” Melinda says. And, for the most part, that was fine. Even when Melinda got pregnant and had a baby, the setup still worked. (It helped that the other couple was there only a few nights a month.) That is, until the real-estate market crashed in the late aughts and their in-laws suffered investment losses. “They ended up being overextended, and keeping this home was a challenge to them financially,” says Melinda, “so we sort of had to take over a bigger chunk of the payments.”

For a while, that was okay, too. But then her in-laws decided to rent out their portion of the triplex so they wouldn’t have to pay the mortgage themselves. “We suggested that we’d front the money while we waited for the house to sell,” says Melinda—they were thinking of moving out of the city anyway. She and her husband very much did not want a tenant, but the in-laws insisted. The new roommate was pleasant, but “we were sharing the apartment with someone we didn’t know,” Melinda says. After 15 months, the brownstone finally sold and both couples walked away, their finances intact but their goodwill spent.

“There was bad blood for a long time,” Melinda says. They stopped hanging out as much, and when the extended family got together and they’d run into each other, it was tense. It took a few years, but she reports that they’re now “beginning to move on.” They talk, but not about what happened. Her bottom-line advice for prospective house-sharers: “Put everything in writing, even when it’s family. The assumption is you’ll always be looking out for each other, but everyone’s finances and needs shift. And when it goes south, it gets personal.”